THE AGRICULTURE NEWSLETTER

Transcription

1 Ricky Thompson, M.S. County Extension Agent Agriculture / Natural Resources r-thompson@tamu.edu (409) THE AGRICULTURE NEWSLETTER Vol. I, No. 3 JEFFERSON COUNTY A publication on Agriculture, Land Use, and Natural Resource Spring, 2010 Published by the JEFFERSON COUNTY OFFICE OF THE TEXAS AGRILIFE EXTENSION SERVICE 1225 Pearl Street, Suite 200, Beaumont, TX (409) Ricky s Range Well it seems there is truth to the ground hog theory this extended period of winter has made a damper on spring time agriculture. The cool nights have prolonged green-up for 2010 which means extended feeding periods and held ground temperatures at a low. I won t harp on the amount of moisture we have had because we all know it doesn t take long for us to dry out. A new year is here and it s time to play ball. We can sit around and talk about all the problems effecting agriculture today or we can be optimistic and approach each day with a positive attitude. I still believe agriculture is the corner stone of the world and everyday is a day given and not a day taken. Regardless of the industry you work in, we have to be smart business men and women. We have to look at our individual practices and make good solid management decisions. In the Beef industry we have a declining demand for our product and there are a lot factors that have caused that. I think we all need to do our part to promote and market our product better. In the Crop industry we have to make best management practices to insure profitability. In all sectors of agriculture, for longevity we have to educate ourselves with new trends. Some times traditional ways can stand in the way of progression and stability. If we can hold on to the things that are showing good results and rethink the practices that are not showing good marks, there will still be agriculture in southeast Texas tomorrow. Programs conducted by the Texas AgriLife Extension Service serve people of all ages regardless of socioeconomic level, race, color, sex, religion, disability or national origin. The Texas A&M University System, U.S. Department of Agriculture and the County Commissioners= Courts of Texas cooperating.

2 High Plains/ Midwest Ag Journal article Nosecretrecipeforbeefdemand.cfm No secret recipe for beef demand Beef industry faces challenges but remains hopeful that demand has big upside potential. Beef demand. What is it, and how can the Beef Checkoff Program influence changes in demand? These are questions that a recent checkoff-funded "U.S. Beef Demand Drivers and Enhancement Opportunities: A Research Study" tried to answer. Beef demand: What it is and what it isn't Oftentimes, demand is confused with consumption. Actually, per capita consumption is best seen as a "disappearance" number. As agricultural economist Dr. Wayne Purcell explains: "Add beginning inventories and production to imports, then subtract ending inventories, exports and disappearance, and divide by population." As a disappearance number, we "consumed" an estimated 65.2 lbs of beef per capita in the U.S. in 2007, for example, because that is how much beef we had in the U.S. But that number has a lot to do with supply and availability--and little, if anything, to do with demand. Instead, beef demand is the set of quantities of beef that consumers will purchase at different prices. If, for example, we have a quantity of 65.2 lbs of beef per capita to sell, it is price that will adjust to clear the market--and the price that consumers are willing to pay will depend on how much consumers like the product offerings, as well as the price of other meats, and consumer income levels. A correlation might help: "Some years, Ford builds too many pickups and, as the model year nears its end, they offer huge discounts to get them off the lots," Purcell notes. "All the current year pickups will be sold, or consumed, but we certainly would not say the demand for Ford pickups is robust when the prices have to be cut in half to get them sold. Similarly, if you are a purebred breeder and seller of bulls, is there not a problem with demand if the only way you can sell as many bulls as last year is at a 20 percent decline in price?" Dr. Purcell encourages producer groups to run speakers out of the room if they come in talking about consumption as a measure of demand. If we focus on availability, he says, then we ignore the desirability of what we offer--and we go, as we did for nearly 20 years, with an unacceptable product offering where up to 25 percent of the steaks and roasts from Choice beef were too tough to chew.

3 Demand will only be forthcoming, Purcell says, if we understand demand and offer consumers what they want in the form of a continuing series of new quality-controlled products. There simply has to be a consumer-level willingness to pay that supports and finances all this progressive change over time. Every 10 years, the beef industry takes an introspective look at the activities completed and what lies ahead. The 2008 study, completed by Drs. James Mintert and Ted Schroeder, professors in the Department of Agricultural Economics at Kansas State University along with Dr. Glynn Tonsor from Michigan State University, intended to quantify key factors leading to beef demand shifts over time and use that knowledge to guide future decision-making. So where does the beef industry currently stand? First, it's important to keep in mind that increasing beef demand doesn't just happen at the shelves of the grocery store. It requires a joint effort by all vertical segments of the beef production, processing and marketing chain or, as is commonly said, from pasture to plate. This offers plenty of opportunities for checkoff programs to make an impact on beef demand. "We have our work cut out for us," says Cattlemen's Beef Board Chairman Lucinda Williams, a dairy producer from Hatfield, Mass. "We had no way of foretelling the future and the economic struggles we're all faced with as producers and consumers. In spite of all this, we remain grounded and committed to making the best decisions we can to fund the right programs that have the potential to increase producer profitability along the way. "We need to focus on the things we can have some impact on," Williams continues. "We can't impact the economy; there is no secret recipe. We have to react to the economy, make wise program choices, and therefore influence beef demand through our beef checkoff dollars." A lock on the wallet One of the first conclusions Mintert draws is that beef demand is very responsive to changes in consumer expenditures on goods and services. On average, he notes, a 1 percent increase in total U.S. consumer expenditures results in a 0.9 percent increase in the quantity of beef demanded. Given the state of the economy, one might assume (with good reason) that consumers won't be rushing out to spend the nest egg. Therefore, a decline in U.S. retail beef demand is likely in If consumers are more price-conscious, what then does that mean for beef demand? Mintert suggests that although price is integral to attracting consumers to purchase beef, small price increases or declines by themselves have small discernible impacts on beef consumption. The key for the beef industry is to provide consumers with products that meet their needs. If the industry fails to do that, consumers may be encouraged to look at other protein sources such as poultry and pork. So, that means the industry needs to continue focusing some of its efforts on providing consumers what they want, which is a product that is nutritious, flavorful, tender, safe, healthy and convenient.

4 That leads us to our next point: food safety. As witnessed with the "cow that stole Christmas" in 2003 and the latest debacle at Hallmark/Westland, food safety recalls adversely impact consumer demand for beef. And, the increase in food safety recalls caused retail beef demand to decline 2.6 percent in "As the industry develops programs designed to improve beef demand, ensuring consumers have a safe supply of beef is critical to maintaining consumer confidence," Mintert reports. "A cooperative effort among vertical market participants is essential to protecting food safety and beef's image among consumers." Telling the beef story Beef demand benefits from increasing published information regarding health benefits associated with zinc, iron or protein in diets. Studies show that beef demand also responded positively to extensive publication of information promoting Atkins, high-protein or low-carb diets. Likewise, beef demand declines when articles are published linking diet and fat consumption to cholesterol, heart disease or arteriosclerosis. Mintert suggests that when consumers receive a consistent, positive message with respect to beef consumption and human nutrition, it boosts beef demand. Prior to this study, data showed that when consumers received a consistent, negative message with respect to beef consumption and human nutrition (e.g., cholesterol), beef demand declined. Now, the industry can help countermand that by identifying and publicizing positive information to health professionals, nutritionists and, especially, consumers. Times are a changin' From the early '80s to the late '90s, the number of women employed outside the home jumped from 53 percent to 60 percent. As this percentage increases, time available for in-home food preparation declines, thereby increasing consumer demand for products that can be prepared quickly and easily. As a result, consumers are increasingly demanding convenience. Studies reveal that as female employment outside the home and food consumed away from home increases, beef demand decreases. Yet poultry and pork demand continues to thrive when women are working outside the home. Why? Mintert says it's likely related to differences in the pace of newproduct introductions. For every new convenience beef product introduced, poultry releases 1.6 new products. That's why the Beef Checkoff Program has increased its focus and resources on development of new convenience products in recent years. Something has to compete with the chicken nugget and the slew of other newer poultry products. "The checkoff is making a distinct difference bringing the value cuts through muscle profiling back to the consumers," Williams says. "And it does help build beef demand when we have new cuts of beef that consumers are enjoying and purchasing. That brings dollars back into producers' pockets."

5 The verdict According to the latest USDA numbers, on Jan. 1, the U.S. beef cow herd was estimated at 31.7 million head, 2.4 percent smaller than a year earlier. Looking ahead, Mintert expects the herd shrink again during But, he points out that there is a potential upside to the herd reduction currently underway. Producers are learning to make more with less, and consumers have the same mindset when it comes to personal finances. "Cow-calf producers need to keep their eye on the future. With a shrinking U.S. herd, over time we're reducing the quantity of meat provided to consumers. When the economy turns around and beef demand recovers, we do so with a tight supply base," Mintert concludes. "In the past, that has created potential for a strong upswing in prices. Cow-calf producers need to get through 2009 and possibly 2010, and then things may really bounce back as the U.S. economy recovers. They also need to invest in risk management to manage downside risk. "In the past 18 months, the equity drain on cattle feeders has been huge and will continue to be for a while longer. Cattle feeders need to rationalize what's taking place and might end up ratcheting down the price we pay for feeder cattle. Feeders didn't anticipate demand dropping so drastically and that's what this market has been about: demand, not supply." Mintert states there is "no single dominant beef demand driver that the industry should focus all of its attention on." The beef industry is dynamic, flexible and responsive to many outside influences, which makes it even more necessary for Beef Board and state beef council leadership to monitor and adjust to change, and to work with every vertical segment along the way. So while there's no secret recipe for increasing beef demand, that doesn't mean that producers involved with making decisions on where beef checkoff dollars should be invested quit cooking.

6 2010 Beef Symposium and Trade Show Ford Park October 30 The Beef Symposium and Trade Show this past year was a great success, and we are proud of the response we have received. Our committee has already met to begin the plans for this year s Symposium and Trade Show. We hope to make this year s Symposium even more exciting. We plan to bring in great speakers and more exciting exhibits for you to browse and visit. Make your plans to attend the Southeast Texas Symposium and Trade Show. ICA Bull & Heifer Sale Plans are already underway for the 15th Annual Southeast Texas ICA Commercial Bull & Heifer Sale to be held Saturday, March 13, 2010 at the Ford Park Complex a few miles west of Beaumont on IH-10. The sale will offer over 120 Quality Breeding Age Bulls & Consignments including 475 Commercial Breeding Age Females (Open, Bred & Pairs). Cattle may be viewed after 5 p.m. Friday, March 12 and between 7 and 10 a.m. Saturday. Programs conducted by the Texas AgriLife Extension Service serve people of all ages regardless of socioeconomic level, race, color, sex, religion, disability or national origin. The Texas A&M University System, U.S. Department of Agriculture and the County Commissioners= Courts of Texas cooperating.